Tunisian economy picks up with robust performance in tourism

Tunis, Tunisia (PANA) - There are encouraging signs that economic activity is picking up in Tunisia following a 2.6 percent (year-on-year) growth registered in the first half of this year, with robust performance in agriculture, tourism, and services.

According to an International Monetary Fund (IMF) staff team that visited the North African country from 15-31 August, the number of tourists visiting Tunisia since the start of the year is the highest since 2010.

“The authorities’ commitment to reducing fiscal imbalances is also bearing fruit. The execution of the budget in the first six months of 2018 is consistent with achieving a significant deficit reduction this year. Containing deficits will help reduce Tunisia’s high public debt that burdens the economy and future generations,” the team summed up in its end-of-mission statement made available to PANA on Saturday.

"Staying the course on reducing the fiscal deficit this year and next is critical to stabilize debt and reduce excessive demand for imports given the recent increase in global oil prices,” suggested IMF staff team leader Björn Rother.

“It will remain particularly important to pursue reforms of untargeted energy subsidies, manage carefully the public wage bill, and put the public and private pension funds on a sustainable basis. These steps will help to contain expenditure that disproportionately benefits the better-off.

“They will also make more resources available for public investment, which will boost growth and jobs, to the benefit of the young and the unemployed. The IMF team welcomes the government’s intention to further increase social spending, which it views as critical to protect the poor and vulnerable in the period ahead,” he further remarked.

The IMF mission made the visit to discuss the Tunisian authorities’ policy plans under the Fourth Review of the country’s economic reform programme supported by a four-year IMF Extended Fund Facility (EFF) arrangement.

"The Tunisian authorities and the IMF team reached a staff-level agreement on the policies needed to complete the fourth review of Tunisia’s EFF. The Tunisian authorities emphasized their intention to continue to act decisively to contain the budget deficit, which would allow the IMF’s Executive Board to consider the Fourth Review at the end of September. Completion of the review would make available about US$257 million, bringing total disbursements under the EFF to about US$1.5 billion,” Mr. Rother said at the end of the visit.

"Although growing, the economy remains too dependent on consumption and imports. Investment has again been weak this year. Unemployment among the young and women, especially those who are well-educated, remains very high,” he observed.

In the IMF team’s view, additional economic reforms, which include strengthening governance and enforcement in the government’s anti-corruption fight, are necessary to overcome investor reluctance and build confidence. These efforts will help unleash the potential of private sector and generate more opportunity and jobs for all Tunisians.

Meanwhile, long-standing economic imbalances continue to pose significant risks to the Tunisian economy. Inflation declined marginally in July, but at 7.5 percent, it remains considerably higher than in previous years.

Money and credit have continued to increase rapidly and the dinar has depreciated further, which will likely create new inflationary pressures in the months ahead. Moreover, the expected improvement in the current account deficit has been delayed: imports are still too high relative to exports and other inflows of foreign currency. Foreign exchange reserves are still below levels commonly seen in other emerging-market economies.

Also, Mr. Rother pointed out that Tunisia’s external environment is witnessing new challenges. “Oil prices are significantly higher than projected at the beginning of the year and international financial markets have become more volatile.”
-0- PANA AR 1Sept2018